Goldman Sachs Group Inc. on Dec. 20 initiated coverage of the companies with buy ratings, saying strong economic activity and real household income gains should sustain high air-travel growth in the region.

Stocks rally into 2011

(1:35)

Both strategists and individual investors show faith in bull market for the new year.

“Less than a third of Brazilian families are potential air travelers today,” wrote analyst Eduardo Siffert Couto in a note to clients. “This should reach 50% by 2020, representing 12 million families flying for the first time.”

Goldman said Gol, as the leading Brazilian low-cost carrier, “is the major beneficiary of a strong domestic market,” and that it’s trading below its global peers. Tam, as the only Brazilian long-haul carrier, “benefits from increased foreign travel on the back of a strong local currency,” wrote Couto.

The financial-services firm also started coverage of Chile’s Lan Airlines
LFL, +0.49%
with a neutral rating based, citing “unattractive” relative valuation, but said that Lan is the region’s “best operating airline” with low earnings volatility and high operating margins.

Tam and Lan are currently awaiting clearance from regulators for their plans to merge.

Citigroup said it’s maintaining its bias for Latin American copper and iron ore companies in 2011 in what’s expected to be another positive year for metals, “albeit at a smaller magnitude than 2010, coming from a higher base level,” wrote Citi analyst Alexander Hacking to clients.

In other developments Monday, Chile’s central bank said it will intervene in the currency market as it aims to increase the level of its foreign-currency reserves.

U.S. stocks also started the new year with advances, rallying to two-year highs after an industry report showed the 17th straight month of growth in the manufacturing sector. U.S. stocks rally to two-year highs.

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